BSP issues guidelines on beneficial ownership due diligence

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) has issued its guidance paper for all its supervised financial institutions on best practices in identifying and handling beneficial ownership information to promote better risk management systems against money laundering.

In a memorandum signed by BSP Deputy Governor Chuchi Fonacier on June 20, the BSP released its guidance paper to encourage BSP-supervised financial institutions (BSFIs) in enhancing the identification and verification process of beneficial ownership, tailored-fit to the institution’s risk and context.

Fonacier said that while financial transactions of a juridical or legal person contribute to the depth and breadth of the country’s financial system, separate legal personalities of entities can be used for complex schemes to conceal the true identity of beneficial owners and the real purpose of transactions.

“Criminals may hide behind seemingly legitimate businesses by concealing their beneficial ownership (BO) status with complex corporate ownership structures or arrangements,” Fonacier said.

“Consequently, BO due diligence is increasingly regarded as an essential element of money laundering (ML), terrorist financing (TF) and proliferation financing (PF) risk management framework,” she added.

Under the guidelines, BSFIs must remain vigilant in implementing beneficial ownership customer due diligence and reinforce transparency measures given the increasing misuse and abuse of legal persons for ML/TF activities.

The BSP said BSFIs, in general, have established ML/TF/PF risk management policies and practices covering the identification, verification, sanctions screening, ongoing monitoring and updating of beneficial ownership information.

However, BSFIs should focus more on enhancing the BO identification process using “control lens,” taking a multi pronged approach in collecting BO information as well as reinforcing a risk-based approach in verifying information.

“As BSFIs deal with multitudes of customers, including legal persons and their financial transactions, a holistic process to identify BOs is crucial,” the BSP said.

“In line with this, BO identification process should also consider the ‘control prong’ or who exercises significant responsibility to control, manage or direct the legal entity, to complement BO identification using ownership threshold,” it said.

It also said that understanding the management and governance structure of a corporate client could help in identifying who has the ultimate effective control of the client.